Volume
III Issue 12
June 2007
MONETARY
AND CREDIT INFORMATION REVIEW
POLICY
PMRY
Guidelines Revised
Prime Minister's Rozgar TYojana (PMRY)
he terms and have been conditions revised. The revised
guidelines are - of the
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The family income ceiling has
been enhanced from Rs.40,000 per annum to Rs.1 lakh per annum.
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The
project cost has been enhanced from Rs. 1 lakh to Rs.2 lakh for business/service
sector and from Rs.2 lakh to Rs.5 lakh for the industry sector.
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Ceiling
on subsidy has been enhanced from Rs.7,500 to Rs.12,500 per beneficiary except
in the north - eastern states (including Sikkim), Himachal Pradesh, Uttarakhand
and Jammu and Kashmir, where the ceiling would remain at Rs.15,000 per beneficiary.
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The ceiling on subsidy for self help groups (SHGs) has been enhanced
to Rs.15,000 per beneficiary subject to a maximum amount of Rs. 1.25 lakh per
SHG.
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The scheme would be implemented in the rural as
well as the urban areas.
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Banks should make efforts
to achieve the target (i.e., complete disbursement of loan and subsidy) by the
end of March, 2008.
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While processing fresh applications,
the district industry centres (DICs) of the respective state/union territory (UT)
should be requested to take into account applications already pending with them
so that such persons are not required to apply afresh.
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The
scheme envisages coverage of scheduled caste (SC)/ scheduled tribe (ST) and minority
candidates at least equal to their population in the district/state. The percentage,
however, should not be less than 22.5 per cent for SC/STs, 27 per cent for other
backward classes (OBCs) and 30 per cent for women. Equitable share for minorities
should also be ensured.
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All efforts should be made
to improve loan recovery under the scheme.
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The number
of sponsored cases should be 125 per cent of the assigned target.
Revision of Differential Rate of Interest
Scheme
In his Budget Speech for 2007-08, the Hon’ble Finance
Minister had proposed to raise the limit of loan under the differential rate of
interest (DRI) scheme from Rs 6,500 to Rs 15,000 and the limit of housing loan
from Rs 5,000 to Rs 20,000 per beneficiary.
Banks have, therefore,
been advised to issue necessary instructions to their controlling/branch offices
to ensure that the revised guidelines are implemented immediately. The target
for lending under the DRI scheme would continue to be 1 per cent of the previous
year’s total advances, as earlier. The other terms and conditions of the
scheme remain unchanged.
In March, 1972, the Government of India
had formulated a scheme for extending financial assistance at concessional rate
of interest at the rate of 4 per cent p.a. to selected low income groups for productive
endeavours.
PMRY – Salient Features
The
Prime Minister’s Rozgar Yojana (PMRY) for providing self-employment to educated
unemployed youth of economically weaker sections has been in operation since October
2, 1993. The scheme aims at assisting the eligible youth in setting up self-employment
ventures in industry, service and business sectors. The salient features of the
scheme are :
Age Limits
(i) 18 to 35 years for all educated
unemployed.
(ii) 18 to 40 for all educated unemployed in north-east states,
Himachal Pradesh, Uttarakhand and
Jammu and Kashmir.
(iii) 18 to 45 years
for scheduled castes/scheduled tribes, ex-servicemen, physically disabled and
women.
Educational Qualification
The beneficiary should
have passed Standard VIII. Preference is given to those who have been trained
for any trade in government recognised/approved institutions for a duration of
at least six months.
Family Income
Neither the income
of the beneficiary along with his/her spouse nor the income of the beneficiary’s
parents should exceed Rs.1,00,000 per annum.
Residence
The beneficiary should be a permanent resident of the area for at least 3 years
(relaxed for married men in Meghalaya and for married women in the rest of the
country. For married men in Meghalaya and for married women in the rest of the
country, the residency criteria applies to the spouse or in-laws.
Defaulter
The beneficiary should not be a defaulter to any nationalised bank/financial institution/co-operative
bank. A person already assisted under other subsidy linked government schemes
would not be eligible under this scheme.
Activities Covered
All economically viable activities are permitted including agriculture and allied
activities but excluding direct agricultural operations like raising crop, purchase
of manure, etc.
Project Cost
Rs.2 lakh for business/service
sector and Rs. 5 lakh for industry sector. Loan should be of composite nature.
If two or more eligible persons join together in a partnership, project up to
Rs.10 lakh is covered. Assistance would be limited to individual admissibility.
Subsidy/Margin Money
Subsidy is limited to 15 per cent of
the project cost subject to a ceiling of Rs.12,500 per entrepreneur. Banks are
allowed to take margin money from the entrepreneur varying from 5 per cent to
16.25 per cent of the project cost so as to make the subsidy and the margin money
together equal to 20 per cent of the project cost.
For north-eastern
states, Himachal Pradesh, Uttarakhand and Jammu and Kashmir, the subsidy is 15
per cent of the project cost subject to a ceiling of Rs.15,000 per entrepreneur.
Margin money contribution from the entrepreneur may vary from 5 per cent to 12.5
per cent of the project cost so as to make the subsidy and the margin money together
equal to 20 per cent of the project cost.
Collateral
No collateral for units in industry sector with project cost up to Rs.5 lakh (the
loan ceiling under PMRY). For partnership projects under industry sector, the
exemption limit for obtaining collateral security is Rs. 5 lakh per borrower account.
For units in service and business sector, no collateral for project up to Rs.2
lakh. For partnership project, exemption from collateral is limited to an amount
of Rs.2 lakh per person participating in the project cost.
Rate of
Interest/Repayment Schedule
Normal rate of interest shall be charged.
Repayment schedule may range from 3 to 7 years after an initial moratorium as
may be prescribed.
SHGs
SHGs can be considered for assistance
under the Scheme provided:
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Educated unemployed youth
who satisfy the eligibility criteria laid down under the Scheme volunteer to form
SHG to set up self-employed ventures (common economic activity).
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A SHG may consist of 5 -20 educated unemployed youth.
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No upper ceiling on project cost.
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Loan
may be provided as per individual eligibility taking into account requirement
of the project.
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A SHG may undertake common economic
activity for which loan is sanctioned without resorting to onward lending to its
members.
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The subsidy ceiling for SHG is Rs. 15,000
per beneficiary subject to a maximum of Rs. 1.25 lakh per SHG.
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Subsidy
may be provided to the SHG as per the eligibility of individual members taking
into account relaxation provided in north-eastern states, Uttarakhand, Himachal
Pradesh and Jammu and Kashmir.
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Required margin money
contribution (subsidy and margin to be equal to 20 per cent of the project cost)
should be brought in by the SHG collectively.
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The exemption
limit for obtaining collateral security is Rs.5. lakh per borrowal account for
projects under industry sector. Exemption from collateral is limited to an amount
of Rs.2 lakh per member of SHG for projects under service and business sectors.
Banks may consider enhancement in limit of exemption of collateral in deserving
cases.
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Implementing agencies may decide necessity of
pre-disbursal training for all the members/majority of the members of the group.
TDS
on 8 % Savings Bonds, 2003
The Reserve Bank has advised banks that
in terms of Government of India’s notification dated May 31, 2007, tax should
be deducted at source on interest exceeding rupees ten thousand payable during
the financial year, on 8 per cent Savings (Taxable) Bonds, 2003 from June 1, 2007.
RRBs
Participation in Consortium Lending
With a view to providing more business avenues and opportunities to regional rural
banks (RRBs) for lending, they have been permitted to participate in consortium
lending, within the extant exposure limits, with their sponsor banks as also with
other public sector banks and development financial institutions (DFIs). Such
permission is subject to the condition that the project to be financed is in the
area of operation of the RRB concerned and guidance and appraisal of the project
is provided by its sponsor bank.
Setting up Service Branches/CPCs/Back
Offices
RRBs have been allowed to set up service branches/ central
processing centres (CPCs)/offices exclusively to attend to back office functions,
such as, data processing, verification and processing of documents and also issuance
of cheque books, demand drafts, etc., and other functions incidental to their
banking business. These offices should have no interface with customers and would
not be allowed to be converted into general banking branches. These offices would
be treated on par with a branch and RRBs are required to obtain necessary licence
from the Reserve Bank’s concerned regional office.
FEMA
Opening of Escrow/Special Accounts by Non-Resident Corporates
AD Category – I banks have been permitted to open escrow account and special
account on behalf of non-resident corporates, without the Reserve Bank’s
prior approval for acquisition/transfer of shares/convertible debentures through
open offers/delisting/exit offers, subject to the relevant Securities and Exchange
Board of India (SEBI) [Substantial Acquisition of Shares and Takeovers (SAST)]
Regulations, 1997 or any other applicable SEBI regulations/provisions of the Companies
Act, 1956 and to the terms and conditions specified below –
(i)
Acquisition/transfer of shares should be strictly in accordance with the provisions
of FEMA Notification No. 20/ 2000-RB dated May 3, 2000 as amended from time to
time and SEBI (SAST) Regulations, 1997 or any other SEBI regulations as applicable.
(ii)
The accounts shall be non-interest bearing.
(iii) Escrow account
may be opened in Indian rupees, jointly and severally, with permitted credits
and debits as indicated below : Permitted credits : foreign inward remittance
through normal banking channels.
Permitted debits : as per SEBI (SAST)
Regulations or any other SEBI regulations, as applicable.
(iv)
Special account may be opened in rupees, jointly and severally, with credits and
debits as per SEBI (SAST) Regulations or any other SEBI regulations, as applicable.
(v)
The resident mandatee empowered by the overseas acquirer for this purpose, may
operate the escrow account in accordance with SEBI regulations, and with the specific
approval of the AD Category – I bank with whom the account has been opened.
(vi)
No fund based/non-fund based facilities should be permitted against the balance
in the accounts.
(vii) The AD Category - I bank should comply
with the ‘know your customer’ guidelines issued by the Reserve Bank.
(viii) Balance in the escrow account, if any, should be repatriated
at the then prevailing exchange rate (the exchange rate risk would be borne by
the overseas company acquiring the shares), after all the formalities in respect
of the acquisition are completed.
(ix) If the acquisition/transfer
proposal does not materialise, the AD Category – I bank may allow repatriation
of the entire amount lying to the credit of the escrow account on being satisfied
with the bonafides of such remittances.
(x) The accounts should be closed
immediately after completing the requirements as indicated above.
Norms
for MF Investment in Overseas Securities Liberalised
To enable mutual
funds (MFs) to tap a larger investible stock overseas, they have been permitted
to invest in –
(i) Overseas mutual funds that make nominal investments
(to the extent of 10 per cent of net asset value) in unlisted overseas securities;
(ii) Overseas exchange traded funds that invest in securities; and
(iii)
American depository receipts (ADRs)/global depository receipts (GDRs) of foreign
companies.
Foreign Investments in Debentures
The Reserve Bank has clarified that henceforth, only instruments which are fully
and mandatorily convertible into equity, within a specified time would be reckoned
as part of equity under the foreign direct investment (FDI) policy and eligible
to be issued to persons resident outside India under the FDI scheme.
Foreign
institutional investors (FIIs) registered with SEBI, would be eligible to invest
as hitherto, in listed non-convertible debentures/bonds issued by Indian companies
in terms of Reserve Bank/SEBI norms on investment in rupee debt instruments, including
the ceilings prescribed from time to time.
Companies which have
already received funds from outside India for issue of partially/optionally convertible
instruments on or before June 7, 2007 may issue such instruments. The existing
investments in instruments which are not fully and mandatorily convertible into
equity may continue till their current maturity.
Foreign Investments
in Preference Shares
The Government of India has notified the revised
guidelines for foreign investment in preference shares. The revised guidelines
which came into effect from April 30, 2007 are –
(a) Foreign
investment coming as fully convertible preference shares would be treated as part
of share capital. This would be included in calculating foreign equity for purposes
of sectoral caps on foreign equity, where such caps have been prescribed.
(b)
Foreign investment coming as any other type of preference shares (non- convertible,
optionally convertible or partially convertible) would be considered as debt and
would require conforming to external commercial borrowing (ECB) guidelines/caps.
(c)
Any foreign investment as non-convertible or optionally convertible or partially
convertible preference shares as on and up to April 30, 2007 would continue to
be outside the sectoral cap till their current maturity.
(d)
Issue of preference shares of any type would continue to conform to the guidelines
of the Reserve Bank/SEBI and other statutory bodies and would be subject to all
statutory requirements.
Accordingly, with effect from May 1,
2007, only preference shares which are fully and mandatorily convertible into
equity within a specified time would be reckoned as part of share capital and
eligible to be issued to persons resident outside India under the FDI scheme.
Foreign
investments in other types of preference shares (i.e. non-convertible, optionally
convertible or partially convertible) for issue of which, funds have been received
on or after May 1, 2007 would be considered as debt and should conform to ECB
guidelines/caps. Accordingly, all the norms applicable to ECBs, viz., eligible
borrowers, recognised lenders, amount and maturity, end-use stipulations, etc.,
would apply. Since these instruments would be denominated in rupees, the rupee
interest rate would be based on the swap equivalent of LIBOR plus the spread as
permissible for ECBs of corresponding maturity.
Companies which
have received funds from outside India for issue of partially/optionally convertible
or redeemable preference shares on or up to April 30, 2007 may issue such instruments.
The existing investments in such preference shares which are not fully convertible
may continue till their current maturity.
Remittance on Winding up
of Companies
AD Category - I banks have been permitted to allow remittance
out of the assets of Indian companies under liquidation under the provisions of
the Companies Act, 1956, subject to conditions as follows :
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The
AD Category - I bank should ensure that the remittance is in compliance with the
order issued by a court in India/official liquidator or the liquidator in case
of voluntary wind up.
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No remittance should be allowed
unless the applicant submits –
(i) No objection
or tax clearance certificate from the Income Tax authority for the remittance;
(ii) Auditor’s certificate confirming that all liabilities in India
have been either fully paid or adequately provided for;
(iii) Auditor’s
certificate stating that the winding up is in accordance with the provisions of
the Companies Act, 1956;and
(iv) In case of winding up otherwise than by
a court, an auditor’s certificate stating that there is no legal proceeding
pending in any court in India against the applicant or the company under liquidation
and there is no legal impediment in permitting the remittance.
Remittance
for Import of Equipments by BPO Companies
AD Category – I banks
have been advised to allow business process outsourcing (BPO) companies in India
to make remittances towards the cost of equipment to be imported and installed
at their overseas sites.
The remittances would, however, be subject
to conditions indicated below:
(i) The BPO company should have obtained necessary
approval from the Ministry of Communications and Information Technology, Government
of India and other authorities concerned for setting up the International Call
Centre (ICC).
(ii) The remittance should be allowed based on the AD
Category
– I bank's commercial judgement, the bonafides of the transaction and strictly
in terms of the contract.
(iii) The remittance is made directly to the account
of the overseas supplier.
AD Category – I banks should
also obtain a certificate as evidence of import from the chief executive officer
(CEO) or auditor of the importer company that the goods for which remittance was
made have actually been imported and installed at overseas sites.
Operation
of NRO Account by Power of Attorney Holder
The Reserve Bank has advised
banks to allow operations on a non-resident rupee ordinary (NRO) account by power
of attorney granted in favour of a resident by a non-resident individual account
holder. Accordingly, banks may in terms of such a power of attorney, allow operations
on an NRO account provided, such operations are restricted to-
(i)
all local payments in rupees including payments for eligible investments subject
to compliance with relevant regulations made by the Reserve Bank; and
(ii)
remittance outside India of current income in India of the non-resident individual
account holder, net of applicable taxes.
The resident power of
attorney holder is not permitted to repatriate outside India funds held in the
account other than to the non-resident individual account holder nor to make payment
by way of gift to a resident on behalf of the nonresident account holder or transfer
funds from the account to another NRO account.
Edited and published by Alpana
Killawala for the Reserve Bank of India, Press Relations
Division, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001 and printed
by her at Onlooker Press, 16, Sassoon Dock, Colaba, Mumbai -
400 005. For renewal and change of address please write to the Chief General
Manager, Press Relations Division, Reserve Bank of India, Central Office Building,
12th floor, Fort, Mumbai - 400 001 without enclosing DD/cheque. MCIR is also available
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